Posts Tagged 'Treble Damages'

CK&E attorneys Eric Engel and Kim Sim were pleased to be invited to speak at ERA So Cal’s January 28, 2014 Owners Forum. ERA is the international association of professional sales representatives and electronics industry manufacturers who use independent sales reps. ERA’s member rep firms sell more than $40 billion annually in electronics products for thousands of manufacturers.

The ERA roundtable forum included lively and thoughtful questions and comments by business owners and managers, directed toward improving their ability to collect commissions owed for their sales representatives’ work promoting sales for manufacturers. In addition to outlining important terms that should be included in written contracts, much of the discussion concerned the application of the Independent Wholesale Sales Representatives Contractual Relations Act, California Civil Code §§ 1738.10 et seq. Under the Act, a manufacturer must have a signed written contract with the sales rep containing particular terms required by the Act, and the manufacturer must provide a written accounting with every payment of commissions. When a manufacturer willfully fails to comply with the requirements of the Act, the sales rep is entitled to three times his or her unpaid commissions and other damages, plus attorney fees.

Eric Engel and Kim Sim were the trial attorneys in Reilly v. Inquest Technology, the first precedent in California that enforced the full remedy of treble damages under the Act. In Reilly, application of the Act led to a $2.1 million jury verdict becoming a judgment for $6.2 million, plus attorney fees and interest. ERA and its partner organization, Manufacturers’ Agents National Association (MANA), were important sponsors of the Act and similar legislation enacted in about 36 other states to protect the rights of independent wholesale sales representatives. CK&E is proud to be able to help sales representatives create contracts that protect their rights to be paid for their services, and to help them enforce their rights when disputes arise.

The article “Breach of Oral Contract, Treble Damages,” was published in the Los Angeles Daily Journal on August 13, 2013. The article discusses the importance for manufacturers, distributors and sales representatives of the published decision of Reilly v. Inquest Technology, Inc., 2013 DJDAR 10164 (Cal. App. 4th Dist. July 31, 2013). The Reilly decision is the first precedent in California to uphold a jury verdict and judgment of treble damages and attorney fees against a manufacturer who failed to pay all sales commissions owed to an independent sales representative. Eric S. Engel and H. Kim Sim represented Peter Reilly, the sales representative, at trial in Orange County Superior Court. They obtained a unanimous jury verdict awarding Reilly $2.1 million in unpaid commissions. Using the Independent Wholesale Sales Representatives Contractual Relations Act, CK&E then obtained an order from Judge Frederick Horn multiplying the jury’s award by a factor of three, for a judgment of $6.2 million plus attorney’s fees and interest. That judgment was fully upheld by the California Court of Appeal in its July 31, 2013 decision. The decision provides a template for future cases seeking treble damages for breach of commission contracts made with independent sales representatives, and can serve as a guide to manufacturers and distributors who want to avoid exposure to such liability.

The California Court of Appeal has unanimously upheld the $6.2 million judgment that Conkle, Kremer & Engel won at trial for a sales representative who had been deprived of $2 million in commissions he had earned.

Peter Reilly was a retired electronics industry executive who agreed to use his extensive contacts in the industry to bring new business to a growing manufacturing company, Inquest Technology, Inc. After Reilly was not paid commissions for the contacts that he brought to Inquest, he asked Conkle, Kremer & Engel for help.

Reilly v. Inquest – Plaintiff’s Trial and Appeal Team

CK&E’s Eric S. Engel and H. Kim Sim were the trial lawyers who devised the case strategy. Key to the strategy was establishing by discovery and summary judgment motion the intricate requirements to impose liability against Inquest under a rarely-used law called the Independent Wholesale Sales Representatives Contractual Relations Act of 1990, California Civil Code section 1738.10 (“the Act”). The main attraction of the Act is that jury awards for willful violations are trebled by the court and attorneys’ fees are awarded to a successful plaintiff. Few laws in commercial litigation impose a penalty of three-times actual damages – that is a greater multiplier than most permissible punitive damages awards.

CK&E was able to prove that the sales representative relationship that Reilly had with Inquest met the particular requirements of the Act. At trial, a unanimous jury found that Reilly procured sales for which he should have been paid $2,065,702 in commissions, based on the testimony of Reilly’s damages expert Thomas Neches. The trial court then applied the Act’s penalty of treble damages to award Reilly a $6.2 million judgment, plus attorneys’ fees and interest, to enter the Judgment for Peter Reilly against Inquest Technology on Jury Verdict.

Of course, the Defendants appealed the judgment. On July 31, 2013, the Reilly v. Inquest Technology case led to the first published decision of a California Court of Appeal to uphold a judgment trebling damages and awarding attorneys’ fees under the Act. Anthony Kornarens was the appellate lawyer for Reilly, with assistance by CK&E. In a unanimous decision, the Court of Appeal determined that Reilly’s judgment of $6.2 million was well supported by the evidence presented at trial, and that Reilly’s claims for unpaid sales commissions were within the special protections of the Act.

Watch for our future posts about the Act, including how CK&E proved that Inquest’s owners were also liable for the full amount of the $6.2 million judgment even though they were not subject to the Act.